What is a Credit Score?
Everyone needs to have a credit score. It helps lenders decide how risky it would be to lend you money, and it can also affect your insurance costs and the interest rate you pay on loans. Your credit score is calculated using the information in your credit report, such as how much debt you owe and whether or not you've paid your bills on time.
You don’t want a low score, but knowing where you stand is half the battle! And just because someone has a low score, that doesn't mean they're doomed financially - remember that many factors are involved in qualifying for loans/credit card offers etc. On the other hand, if managed responsibly, a good credit score can last a lifetime!
How do you get a credit score?
There is no definitive answer to how to get a credit score since there are many different ways to go about it. However, some methods are more reliable and effective than others.
One way to build your score is by using your credit card very carefully. You can use the card for everyday expenses such as groceries or gas, and make sure you always pay your bills on time. This will help establish a pattern of responsible borrowing and improve your credit history.
Another method is taking out a loan from a bank or other lending institution. Again, repay it on time and in full every month to demonstrate good borrowing behavior. A high level of repayment reliability will be reflected positively in your credit score. Finally, if you have any past debts that went into default/collection status, then try to negotiate with the collection agencies involved to be removed from their records.
What factors contribute to your credit score?
There are several different factors that contribute to changes in your score. These include:
- Payment history (paying bills on time is key)
- The percentage debt you have compared to the total amount you're allowed to borrow (your "debt ratio")
- How long you've had credit accounts, and how often you use them
A starting point to improve your credit score over time is to follow these simple tips:
- Build your credit history
- Make all of your payments on time
- Keep your credit utilization low